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From the 1870s to the 1890s, the United States entered a period of rapid industrialization. There was a shift from an agrarian economy to an industrial economy and many Americans began to move to urban areas. Mark Twain called this period the Gilded Age and criticized the era as a time of greed and political corruption. While there were millions of factory workers, the wealthy entrepreneurs who owned the factories represented a tiny fraction of Americans. The few wealthy controlled most of the wealth in the United States during this time.
Laissez-faire ideology influenced many aspects of politics, society, and economics in the Gilded Age. This ideology curbed corruption in government, which ran rampant during the Gilded Age. Politicians spent more time distributing government jobs to their supporters, managing urban political machines, and enriching themselves than dealing with important policy issues and this hit the workers and the farmers the hardest.
It’s perhaps not surprising that in this era of ineffective government, one of the most successful third-party movements in US history emerged. The People’s Party, or the Populists, reached national prominence in the 1890s on a platform of policies aimed at reining in big business and helping struggling farmers. Rich people lobbied and spent freely to gain support for favorable tariff legislation and business-friendly monetary policy. Their efforts were countered vigorously by ever-growing progressive groups opposed to tight money and high tariffs that raised the cost of consumer goods. Civil service reform was a widespread reaction to the rampant political corruption of the era.
The little people—farmers, laborers, small businessmen—were left out of the political equation except at the local machine level. At the city level, they skimmed money from businesses, some kept it for themselves, and some distributed it to the poor. To finance their activities and election campaigns, bosses exchanged favors for votes and money. Power over the local government enabled machines to control the awarding of public contracts, the granting of utility and streetcar franchises, and the distribution of city jobs. The recipients were expected to repay with money or votes. It is worth noting that the political machines were really important to the immigrants because they were provided many necessities by these machines in exchange for their votes. The immigrants did not care that much at the time about corruption, since all they needed was food, clothing, and money. However, machines were awarding more contracts than the budget could afford. Consequently, they raised taxes, which was not welcomed by the working class.
When President James A. Garfield was assassinated four months after assuming office, people were shocked to discover that the assassin was a disgruntled office seeker who had been trying to get a position in Garfield’s administration. Garfield had shown great promise before his assassination, and support for civil service reform grew significantly. In addition, as society grew more complex during the Industrial, the ability to perform routine tasks under government employment also became increasingly complex. It was apparent for these reasons that a professional civil service was required, with employees who would no longer be subject to the political winds. The result of the reform agitation was the passage of the Pendleton Civil Service Reform Act in 1883. The act in effect ended the spoils system by classifying certain jobs, which meant they could not be awarded based on patronage. In addition, the United States Civil Service Commission was established to construct a system under which people would be hired on merit rather than based on political connections.
Additionally, during the Progressive Era, we have the introduction of the direct primary, the initiative, the referendum, and the recall. In a direct primary voters elect delegates who choose the party’s candidates at a nominating convention. Initiative is a power reserved to the voters to propose legislation, by petition that would enact, amend, or repeal a City Charter or Code provision. Referendum is a power reserved to the voters that allows the voters, by petition, to demand the reconsideration and repeal of any legislative action of the City Council. Recall is a power reserved to the voters that allows the voters, by petition, to demand the removal of an elected official. On top of that, we also have the Seventeenth Amendment (1911) to the United States Constitution which established the popular election of United States senators by the people of the states.
At the national level, only a handful of extremely rich individuals exercised a powerful influence over Congress. All the presidents from Abraham Lincoln’s death until Teddy Roosevelt’s accession were notably weak. Presidents and cabinet members were hounded by job seekers and political machine operatives seeking to collect on campaign promises made. The assassination of President Garfield is proof of this. Weakened presidents were more susceptible to support various legislators’ and lobbyists’ agendas, as they owed tremendous favors to their political parties. As a result of this relationship, the rare pieces of legislation passed were largely responses to the desires of businessmen and industrialists whose support helped build politicians’ careers.
The main source of corruption involved Railroads. The only way to recover from the War was to incentivize economic growth. To do this, the country needed Railroads and for this reason, the government started lowering taxes and giving aid to the Railroads. This Railroads turn out to be corrupt. To get the right to build the Railroads, they start bribing the legislators. On top of that, as rail networks spread, so did competition. On noncompetitive routes, railroads made pricing disproportionate to distance as they boosted charges as high as possible to compensate for unprofitably low rates on competitive routes. In particular, people who depended on railways for business purposes were hurt by the fact that, at least on the local level, railroads had a monopoly on the transportation of goods from producer to market. Shipping rates were uneven and often unfair, especially on lines where no competing systems were available. In addition, large corporations such as Carnegie Steel or Standard Oil were able to pressure rail companies to give them favorable rates and rebates. Farmers in particular were subject to the will of the railroad operators
As a result of those questionable practices and the failure of states to regulate railroads, Congress passed the Interstate Commerce Act in 1877. The law prohibited pools, rebates, and long-haul/short-haul rate discrimination, and it created the Interstate Commerce Commission (ICC) to investigate railroad rate-making. The commission faced a lot of resilience from the railroads as corrupt courts usually ruled in favor of the companies when cases were prosecuted.
Another instance where the tendency of Congress to serve the interest of the rich rather than the people was put on full display was the Tariff Policy. Congress had created tariffs that dramatically raised taxes on imported goods to protect American manufacturers and agricultural products from foreign competition. However, tariffs quickly became a tool by which special interests could enhance their profits. Manufacturers and their congressional allies firmly controlled tariff policy. This damaged the common people who could not buy cheaper products and farmers whose crops were not protected.
This topic was not the primary focus of any President until Woodrow Wilson. Wilson and other members of the Democratic Party had long seen high tariffs as equivalent to unfair taxes on consumers, and tariff reduction was President Wilson’s priority upon taking office. The Revenue Act of 1913 re-established a federal income tax in the United States and substantially lowered tariff rates.
However, the most influential factor during these tense times, when the country was led by one corrupt government after another, was the monopolies. During the last half of the 19th century, it became apparent that large businesses needed to be regulated. As a result, the tradition of laissez-faire was not only impractical but dangerous.
The first major break with the concept of laissez-faire came with the 1890 Sherman Antitrust Act. Businesses were prohibited from using monopolistic practices or acting in restraint of trade and taking unfair advantage of competitors. Like the Interstate Commerce Act, the Sherman Act had to be modified and tightened by later legislation, but the mere passage of the act demonstrated that the age of unbridled corporate excess was finally coming to an end.
The Hepburn Act is a 1906 United States federal law that strengthened the Interstate Commerce Commission (ICC) giving it greater authority to set railroad freight rates and power to set maximum railroad rates and extend its jurisdiction.
The Clayton Antitrust Act, which Congress passed in 1914, prohibited some anti-competitive business practices, such as price-fixing and interlocking directorates (in which the same people sit on the executive boards of competing companies in one industry). This act complemented the Federal Trade Commission law passed the same year, which created a new government board appointed by the president and empowered to investigate and publicize corrupt, unfair, or anti-competitive business practices.
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